The Bank of Canada (BOC) have raised rates once more this afternoon with the overnight rate now at 1.25%. This is the third hike in just 5 meetings and whilst it was expected it does mark a fairly sharp pace of tightening, especially when you consider that July’s hike was the first in almost 7 years.

USD/CAD has been volatile over the announcement but is edging higher as the dust settles.

The market reaction has seen some volatile trade in the Canadian dollar with a sharp move higher seen in USDCAD just ahead of the decision before a strong sell-off once it was announced. Since then the market has consolidated somewhat although it remains firmly higher than where it was ahead of the initial move.

The depreciation in CAD could be due to a combination of factors. First off, a hike was fairly widely expected with markets showing this had been more than 80% priced in ahead of the rate decision. Another reason could be a statement that may be described as cautious and seemingly erring on the dovish side. Selected comments from the statement are as follows:

Another CAD pair that is worth keeping an eye on is the NZDCAD. The market could be carving out an inverse head and shoulders formation and is approaching the potential neckline at 0.9105. A break above here would trigger the setup which may target a move to 94.70.

NZD/CAD is approaching a big resistance level around 0.9105. A break above here could be a major positive development.

The moves in CAD may not be done quite yet with BoC Governor Poloz set to hold a press conference at 4:15PM. His comments on the latest decision could well prove pivotal for the currency.

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